The environment as an asset to economic prosperity and development

Dr. Robert Costanza | Professor of Public Policy | Crawford School of Public Policy, The Australian National University | February 9, 2016

The idea of environmental preservation as an asset, as opposed to an impediment, to economic prosperity and development is both very old and very new.

For the greater part of human history, certainly up until the start of the Industrial Revolution, the benefits humans derived from nature were well recognized and embedded in various cultural rules and norms. Mountains, rivers, and other natural landscapes were often deemed sacred and off limits to the activities which comprised day-to-day existence.

But it is no coincidence that these sacred natural assets also supplied essential life-support services for the communities involved and were revered as much for their life-giving properties as they were for their awe-inspiring beauty.

The environment vs. the economy

This is in stark contrast to the post-industrial view in much of the Western world that nature is merely a pretty picture—nice to enjoy if you can afford it but not essential to the more important business of growing the economy.

It seems that whenever the issue of conservation of nature has entered the public or political discussion, it has been purported to come at a cost and the discussion typically framed as “the environment vs. the economy.”

The introduction of the concepts of natural capital and ecosystem services, however, has dramatically changed the course of this conversation in recent years.

Perception and understanding of "ecosystem services" benefits

“Ecosystem services” are defined as the benefits people obtain from functioning ecosystems. The ecosystems themselves are also referred to as "natural capital." These include provisioning services such as food, water and medicinal plants; regulating services such as climate and air quality management; water purification; mitigation of floods, drought, and disease; supporting services such as soil formation and nutrient cycling; and cultural services that include recreational, scientific, and spiritual benefits.

The aforementioned is both an appropriately broad and vague definition, as it includes the benefits that people perceive as well as those they do not. The conventional economic approach to “benefits” is far too narrow in this regard, and tends to limit benefits only to such tangibles that people not only perceive but are also willing to pay for in some real or contingent sense.

However, the general population’s information about the world, particularly when it comes to ecosystem services, is extremely limited. We can expect many ecosystem services to go almost unnoticed by the vast majority of people, especially when they are public, non-excludable services that never enter the private, excludable marketplace.

Think of the storm regulation value of wetlands. How can we expect the average citizen to understand the complex linkages between landscape patterns, precipitation patterns, and wetlands and flood attenuation, when even the best landscape scientists find this an extremely challenging task?

We need to remember the definition of ecosystem services (the benefits provided by ecosystems), and acknowledge that the degree to which the public perceives and understands them is a separate (and very important) question.

The contribution to sustainable human well-being

People often talk about “economic value,” “ecological value,” and “social value” as if they were separate things. Nothing could be further from the truth.

As the discussion above makes clear, the “value” or “benefit” we are talking about here is the contribution to sustainable human well-being. None of these elements (ecological, social/cultural, economic) are mutually exclusive; that is, none can make a contribution to that goal without interacting with the others.

What we can ask is: what is the relative contribution of, for example, natural capital to sustainable human well-being, in combination with other forms of capital (built, human, social), in a particular context?

We have to look at these things in context and as part of an integrated, whole system of humans embedded in cultures, which are, in turn, embedded in the rest of nature.

The value and interest of "ecosystem services" grows

Interest in ecosystem services has grown rapidly in recent years. In 1997, in a paper published in Nature, 12 co-authors and I estimated the value of global ecosystem services to be approximately $33 trillion USD per year, a figure larger than the global gross domestic product (GDP) at the time. This admittedly crude underestimate, compounded with a few other earlier studies, stimulated a huge surge of interest in this topic.

In 2005, the concept of ecosystem services gained broader attention when the United Nations published its Millennium Ecosystem Assessment (MEA). The MEA was a four-year, 1,300-scientist study for policymakers.

In 2008, the UN Environment Programme, called the Economics of Ecosystems and Biodiversity (TEEB), undertook a second international initiative. The TEEB report was picked up extensively by the mass media, bringing ecosystem services to a broader audience.

Ecosystem services have now entered the consciousness of mainstream media, government, and business. Hundreds of projects and groups are currently working toward better understanding, modeling, valuation, and management of ecosystem services and natural capital. It would be impossible to list all of them here, but emerging global, national, and regional networks such as the Ecosystem Services Partnership and the Intergovernmental Platform on Biodiversity and Ecosystem Services are doing just that, and are coordinating their efforts with one another.

In addition, the Obama administration has recently released a memorandum requiring all federal agencies to incorporate ecosystem services in their decision-making processes. Ecosystem services are now poised to provide real solutions to the problem of how to sustainably manage our critical natural capital assets.

Natural assets as critical ingredients to wealth and well-being

Arguably, the most important contribution of the widespread recognition of ecosystem services is that it reframes the relationship between humans and the rest of nature. An understanding of the role of ecosystem services emphasizes our natural assets as critical ingredients in our overall wealth and well-being.

Sustaining and enhancing human well-being requires a balance of all of our assets—individuals, society, the built economy, and nature. This reframing of the way we view the natural world is essential to solving the problem of how to build a sustainable and desirable future—a goal that we all share.

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Dr. Robert Costanza is a leading ecological economist and professor of public policy at the Crawford School of Public Policy at the Australian National University. He is also a senior fellow at the National Council on Science and the Environment, Washington, DC, a senior fellow at the Stockholm Resilience Center, Stockholm, Sweden, an affiliate fellow at the Gund Institute for Ecological Economics at the University of Vermont and a deTao master of ecological economics at the deTao Masters Academy in Shanghai, China. He received B.A. and M.A. degrees in architecture and a Ph.D. in environmental engineering sciences (systems ecology with economics minor) from the University of Florida. He was co-founder of the International Society for Ecological Economics, and chief editor of its journal. He is also founding editor-in-chief of Solutions. For more information, contact Dr. Costanza at Robert.Costanza@anu.edu.au or follow Twitter @Robert_Costanza.

The views expressed by contributors to the Cynthia and George Mitchell Foundation's blogging initiative, "The Economic Argument for Environmental Protection," are those of the authors and do not necessarily represent the views of the foundation.